Official data suggests almost one in ten people entitled to draw their state pension do not do so immediately, while 14,000 pensioners have suspended their payouts. In return, they receive a higher pension when they do make a claim for the first time or go back to claiming.
Pension experts had expected the number of people deferring their state pension to fall sharply after a change in the rules in 2016 made it less attractive to do so. Before April 2016, you got a 10.4% increase in your pension for every year you delayed taking it, but this has now come down to 5.8%. The change means you need to live for 17 years once you start taking the money to get more overall than you would have done by claiming it straight away; previously the break-even point came after only nine years or so.
However, there’s another complication to think about. The number of people working on past retirement age is now at a record high. For many of these people, a state pension of around £9,000 a year on top of their earnings pushes them into a higher tax bracket. By deferring their pension until they stop working, they’ll pay less marginal tax today – and may pay no tax at all on their state benefits when they do start claiming.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The maths will depend on your circumstances, but if you’re working, the beneficial effect of lower taxes could reduce your breakeven point from deferring your state pension. It’s certainly worth considering.
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Act now to bag NatWest-owned Ulster Bank's 5.2% easy access savings accountUlster Bank is offering savers the chance to earn 5.2% on their cash savings, but you need to act fast as easy access rates are falling. We have all the details
-
Moneybox raises market-leading cash ISA to 5%Savings and investing app MoneyBox has boosted the rate on its cash ISA again, hiking it from 4.75% to 5% making it one of top rates. We have all the details.
-
October NS&I Premium Bonds winners - check now to see what you wonNS&I Premium Bonds holders can check now to see if they have won a prize this month. We explain how to check your premium bonds
-
Bank of Baroda closes doors to UK retail bankingAfter almost 70 years of operating in the UK, one of India’s largest bank is shutting up shop in the UK retail banking market. We explain everything you need to know if you have savings or a current account with Bank of Baroda
-
How to earn cashback on spendingFrom credit cards and current accounts to cashback websites, there are plenty of ways to earn cashback on the money you spend
-
John Lewis mulls buy now, pay later schemeThe CEO of John Lewis has said the retailer will consider introducing buy now, pay later initiatives for lower-priced items.
-
State pension triple lock at risk as cost balloonsThe cost of the state pension triple lock could be far higher than expected due to record wage growth. Will the government keep the policy in place in 2024?
-
Paragon raises rate on one-year fixed cash ISA to 5.75%Paragon Bank ups its one-year fixed cash ISA rate to 5.75% - is it enough to top the table?
